Evolution of the Top 10 Companies in S&P 500 1980 - 2022

There has been a lot of buzz recently about the emergence of large trillion dollar companies. It looks like every investor out there wants to own those companies. It also looks like all those top ten companies have attracted a high portion of returns in the recent year or two. 

I thought it would be fun to look at the evolution of these top ten companies in the S&P 500 over the years, and see where they went from there.

Coincidentally, that is one of Warren Buffett's favorite exercises as well. He likes to see the top ten companies in a given year, and then go forward in time in order to see which types of companies survived, which thrived, and which failed. There are a lot of lessons to be learned from this exercise, notably about moats, competitive advantages, changes, and the types of companies and management teams that can overcome adversity and thrive.

Another lesson is that the top ten list could be an example of the cyclical nature of sectors, and the ebb and flow of sector popularity. While in a lot of cases, these large companies emerge due to investor appetite for their stock, there is always some fundamental support as well. That doesn't mean however that the fundamentals would last, and/or there won't be another sector that does well however.

For example, these are the top ten companies in the S&P 500 in 1980:

You can see a lot of energy names, predominantly so in the top ten list. The only three non-energy companies include IBM, AT&T (Ma-Bell) and General Electric. Coincidentally, 1980 was the top of the energy prices, after the 1970s inflation. Energy prices were about to drop, and stay low for about a couple of decades.

These are the top ten companies in the S&P 500 in 1990:

You can see that energy is only represented through Exxon and Royal Dutch. Fun fact is that up until 2002, the S&P 500 also included foreign companies in its list, for as long as they fit the other fundamental and exchange criteria. 

You could see the emergence of consumer companies like Coca-Cola and Philip Morris, as well as pharmaceuticals like Bristol-Myers Squibb and Merck. You could also see the rise in Wal-Mart, which was winning and on pace to conquer US Retail. IBM, Exxon, GE and AT&T are both on 1980 and 1990 lists. Albeit the AT&T of 1990 was a spin-off from the AT&T from 1980.

These are the top ten companies in the S&P 500 in 2000:

You can see that GE is the largest company in the world, with a market capitalization of half a trillion dollars. The dot-com bubble was in the first inning of deflating, which is why Microsoft, Cisco and Intel are still there, but at roughly half their market cap peaks from just a few months to an year earlier.

You can see the heights in the pharmaceuticals sector, with Pfizer and Merck riding high. Wal-Mart was on top of the world, as it was disrupting the retail segment. You can also see two then famous financial companies, Citigroup and American International Group on the top ten list as well. Those two financials would get a lot of negative headlines just eight years later, during the Global Financial Crisis. But back in 2000, they were on top of the world. Some would argue that GE was a de-facto financial company as well, even if it was formally classified as an industrial. I would leave you to be the judge of this.

The 1999 list was very fascinating as well, because it really market the very top of the technology mania during the height of the dot-com bubble. I am taking a detour of just looking at it from a decade by decade basis, ending on years ending with zero. I just think it is a fascinating observation about the cyclical nature of these top 10 lists, and how different sectors and companies flow in and out of favor with investors.

It's fascinating because it's so tech heavy with the likes of Microsoft, Cisco, Intel, Lucent, IBM and AOL.

These are the top ten companies in the S&P 500 in 2010:

You can see Exxon Mobil, General Electric and Wal-Mart maintaining their position in the top ten companies by market capitalization. You can also see that the market capitalizations from 2000 to 2010 for the top 10 companies had not really increased by much. The 2000 - 2010 period was the so called lost decade for US stocks, where US Stocks basically delivered zero in inflation adjusted total returns to investors. It was dark and gloomy time, when seemingly noone wanted to own US stocks. 

You can also view another energy company - Chevron. The energy sector had experienced strong tailwinds over the preceding decade, as the US was experiencing an energy revolution, following rise in energy prices. In fact, energy was the best performing sector in the US 2000 - 2015. When pretty much most other sectors failed to deliver much in terms of return, energy showered investors with dividends and capital gains.

You can also view a few emerging tech companies. Those tech juggernauts were Apple and Google. They were already popular household names, which seemed too big already in 2010. But their story was just beginning apparently and not over yet. IBM was also a darling back then, as it was growing earnings, dividends and buying back stock at what seemed like cheap valuations. Even the Oracle of Omaha was about to scoop up Big Blue and make it one of the largest holdings in his company (which itself was in the top 10 in 2010).

These are the top ten companies in the S&P 500 in 2020:

You can see the top 10 list is very tech heavy, with Apple, Microsoft, Amazon, Facebook, Tesla and Alphabet. Contrary to previous peaks dominated in one industry however, tech was not done and over with yet however (as of the time of this writing in 2024). These companies had crushed it over the preceding decade.

You see Berkshire Hathaway plodding along nicely. There are two newcomers in the top ten club, Johnson & Johnson and JPMorgan Chase. 

Here's the top 10 companies in the S&P 500 as of July 31, 2024:

You can see Google being a duplicate, with its two share classes. Number 11 spot goes to Eli Lilly, while number 12 spot goes to J.P. Morgan today.

Today, we looked at the evoluation of the top 10 companies in the S&P 500 over the years. We saw that the top leaders may change from decade to decade. That doesn't necessarily mean that these companies failed however. But maintaining a leadership position over long periods of time is hard. It is particularly hard to make money as an investor if you end up overpaying for those leaders when they are at a cyclical high on top of it. 

Stay humble, and keep learning.

Relevant Articles:

- Investing in Nasdaq 100 in 2000

- Warren Buffet’s Favorite Exercise

- A Simple Model For Estimating Future Returns